SK Hynix' Massive Investment: $720bn for Memory Factories
SK Hynix is spending $720 billion on what it calls the largest network of memory factories in the world, despite its shares falling by half since June.
High-Bandwidth Memory: The Unseen Powerhouse
High-bandwidth memory (HBM) is a crucial component of AI systems, providing data to processors at high speeds. It's made by stacking ordinary DRAM, the same memory found in laptops and phones, leading to a significant strain on consumer memory supplies during AI buildouts.
Market Dominance and Competition
SK Hynix holds 58% of the HBM market, followed by Samsung (21%) and Micron (also 21%), according to Counterpoint Research data cited by CNBC.
Building for the Future: Concrete and Geography
The construction of a new factory in Yongin, South Korea, is already underway, set to reach the height of a 50-story building and house six cleanrooms. In contrast, TSMC and Intel are constructing single-story facilities in Arizona with less concrete per wafer. This expansion is driven by geographical constraints in Korea.
Market Skepticism: Peak Already Reached?
While SK Hynix and Samsung have seen significant share drops (50% and 34%, respectively), both companies reported record earnings in June. US-listed SK Hynix shares are down about 21% since their July peak. TrendForce predicts slower growth for DRAM prices in the coming quarters, indicating a potential slowdown in the memory boom.
Shareholder Returns and Long-Term Contracts
SK Hynix has promised shareholder returns in Q3 and Samsung is expected to follow suit. The company's strategy relies on long-term supply agreements with major clients like Nvidia, Google, and SK Group, which secure future demand and justify massive investments.
“Nvidia wants their own custom chips... so it’s not just a commodity,” said SK Group Chairman Chey Tae-won, showcasing a wafer with Jensen Huang's handwritten message: “Please make more.”